OMB APPROVAL
OMB Number:
3235-0045
Estimated average burden
hours per response............38
Required fields are shown with yellow backgrounds and asterisks.
SECURITIES AND EXCHANGE COMMISSION
File No.* SR - 2013 - * 02
WASHINGTON, D.C. 20549
Amendment No. (req. for Amendments *)
Form 19b-4
Page 1 of * 41
Filing by
Municipal Securities Rulemaking Board
Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934
Initial *
Amendment *
Withdrawal
Section 19(b)(2) *
Section 19(b)(3)(A) *
Section 19(b)(3)(B) *
Rule
Extension of Time Period
for Commission Action *
Pilot
19b-4(f)(1)
Date Expires *
19b-4(f)(5)
19b-4(f)(3)
19b-4(f)(6)
Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010
Section 806(e)(1)
Security-Based Swap Submission pursuant
to the Securities Exchange Act of 1934
Section 806(e)(2)
Exhibit 2 Sent As Paper Document
19b-4(f)(4)
19b-4(f)(2)
Section 3C(b)(2)
Exhibit 3 Sent As Paper Document
Description
Provide a brief description of the action (limit 250 characters, required when Initial is checked *).
Proposed Amendments to MSRB Rule G-39, on Telemarketing
Contact Information
Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization
prepared to respond to questions and comments on the action.
First Name * Lawrence
Last Name * Sandor
Title *
Deputy General Counsel, Regulatory Support
E-mail *
lsandor@msrb.org
Telephone * (703) 797-6600
Fax
(703) 797-6700
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
Municipal Securities Rulemaking Board
has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized.
(Title *)
Corporate Secretary
Date 02/11/2013
By
Ronald W. Smith
(Name *)
NOTE: Clicking the button at right will digitally sign and lock
this form. A digital signature is as legally binding as a physical
signature, and once signed, this form cannot be changed.
Ronald Smith, rsmith@msrb.org
Required fields are shown with yellow backgrounds and asterisks.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For complete Form 19b-4 instructions please refer to the EFFS website.
Form 19b-4 Information *
Add
Remove
View
Exhibit 1 - Notice of Proposed Rule Change *
Add
Remove
View
Exhibit 1A- Notice of Proposed Rule
Change, Security-Based Swap Submission,
or Advance Notice by Clearing Agencies
Add
Remove
View
Exhibit 2 - Notices, Written Comments,
Transcripts, Other Communications
Add
Remove
View
The self-regulatory organization must provide all required information, presented in a
clear and comprehensible manner, to enable the public to provide meaningful
comment on the proposal and for the Commission to determine whether the proposal
is consistent with the Act and applicable rules and regulations under the Act.
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change being deemed not properly filed. See also Rule 0-3 under the Act (17
CFR 240.0-3)
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change, security-based swap submission, or advance notice being deemed not
properly filed. See also Rule 0-3 under the Act (17 CFR 240.0-3)
Copies of notices, written comments, transcripts, other communications. If such
documents cannot be filed electronically in accordance with Instruction F, they shall be
filed in accordance with Instruction G.
Exhibit Sent As Paper Document
Exhibit 3 - Form, Report, or Questionnaire
Add
Remove
View
Copies of any form, report, or questionnaire that the self-regulatory organization
proposes to use to help implement or operate the proposed rule change, or that is
referred to by the proposed rule change.
Exhibit Sent As Paper Document
Exhibit 4 - Marked Copies
Add
Remove
View
Exhibit 5 - Proposed Rule Text
Add
Remove
View
Partial Amendment
Add
Remove
View
The full text shall be marked, in any convenient manner, to indicate additions to and
deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit
the staff to identify immediately the changes made from the text of the rule with which
it has been working.
The self-regulatory organization may choose to attach as Exhibit 5 proposed changes
to rule text in place of providing it in Item I and which may otherwise be more easily
readable if provided separately from Form 19b-4. Exhibit 5 shall be considered part
of the proposed rule change.
If the self-regulatory organization is amending only part of the text of a lengthy
proposed rule change, it may, with the Commission's permission, file only those
portions of the text of the proposed rule change in which changes are being made if
the filing (i.e. partial amendment) is clearly understandable on its face. Such partial
amendment shall be clearly identified and marked to show deletions and additions.
3 of 41
1.
Text of the Proposed Rule Change
(a)
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of
1
1934 (“Act”), and Rule 19b-4 thereunder, 2 the Municipal Securities Rulemaking Board
(“MSRB”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a
proposed rule change consisting of amendments to MSRB Rule G-39, on telemarketing. The
proposed rule change would adopt provisions that are substantially similar to the telemarketing
rules of the Federal Trade Commission (“FTC”).
The text of the proposed rule change is attached as Exhibit 5 to this rule filing. Material
proposed to be added is underlined. Material proposed to be deleted is enclosed in brackets.
2.
(b)
Not applicable.
(c)
Not applicable.
Procedures of the Self-Regulatory Organization
The proposed rule change was approved by the MSRB at its July 25-27, 2012 meeting.
Questions concerning this filing may be directed to Lawrence P. Sandor, Deputy General
Counsel, Regulatory Support, or Darlene Brown, Assistant General Counsel, at 703-797-6600.
3.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a)
Purpose
Summary of Proposed Rule Change. The MSRB proposes to amend Rule G-39, on
telemarketing, to add provisions that are substantially similar to FTC rules 3 that prohibit
deceptive and other abusive telemarketing acts or practices. Rule G-39 currently requires
brokers, dealers, and municipal securities dealers (“dealers”) to, among other things, maintain
do-not-call lists and limit the hours of telephone solicitations. In 1996, the SEC directed the
MSRB to enact a telemarketing rule in accordance with the Prevention Act. 4 The Prevention Act
1
15 U.S.C. 78s(b)(1).
2
17 CFR 240.19b-4.
3
16 CFR 310.1-.9. The FTC initially adopted these rules in 1995 under the Telemarketing and
Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (the “Prevention Act”). See
Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) (the
“Telemarketing Sales Rule”). The Telemarketing Sales Rule has been amended since 1995,
prompting the SEC’s request for the MSRB to review its telemarketing rule. See footnote 7
infra.
4
15 U.S.C. 6101-6108.
4 of 41
requires the Commission to promulgate, or direct any national securities exchange or registered
securities association to promulgate, rules substantially similar to the FTC rules to prohibit
deceptive and other abusive telemarketing acts or practices, unless the Commission determines
either that the rules are not necessary or appropriate for the protection of investors or the
maintenance of fair and orderly markets, or that existing federal securities laws or Commission
rules already provide for such protection. 5
In 1997, the SEC determined that telemarketing rules promulgated and expected to be
promulgated by self-regulatory organizations, together with the other rules of the self-regulatory
organizations, the federal securities laws, and the SEC’s rules thereunder, satisfied the
requirements of the Prevention Act because, at the time, the applicable provisions of those laws
and rules were substantially similar to the Telemarketing Sales Rule. 6 Since 1997, the FTC has
amended its telemarketing rules in light of changing telemarketing practices and technology. 7
In May 2011, Commission staff directed the MSRB to conduct a review of its
telemarketing rule and propose rule amendments that provide protections that are at least as
strong as those provided by the FTC’s telemarketing rules. 8 Commission staff had concerns
“that the [self-regulatory organization] rules overall have not kept pace with the FTC’s rules, and
thus may no longer meet the standards of the Prevention Act.” 9
5
15 U.S.C. 6102.
6
See Telemarketing and Consumer Fraud and Abuse Prevention Act; Determination that No
Additional Rulemaking Required, Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62
FR 18666 (Apr. 16, 1997). The Commission also determined that some provisions of the FTC’s
telemarketing rules related to areas already extensively regulated by existing securities laws or
activities not applicable to securities transactions.
7
See, e.g., Federal Trade Commission, Telemarketing Sales Rule, 73 FR 51164 (August 29,
2008) (amendments to the Telemarketing Sales Rule relating to prerecorded messages and call
abandonments); and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January
29, 2003) (amendments to the Telemarketing Sales Rule establishing requirements for, among
other things, sellers and telemarketers to participate in the national do-not-call registry).
8
See Letter from Robert W. Cook, Director, Division of Trading and Markets, SEC, to Michael
G. Bartolotta, then Chairman of the Board of Directors of the MSRB, dated May 10, 2011. The
MSRB was asked by SEC staff, notwithstanding the letter, to refrain from amending Rule G-39
until FINRA completed its rulemaking on this topic.
9
Id.
5 of 41
The proposed rule amendments, as directed by the Commission staff, amend and adopt
provisions in Rule G-39 that are substantially similar to the FTC’s current rules that prohibit
deceptive and other abusive telemarketing acts or practices as described below. 10
General Telemarketing Requirements
Proposed Rule G-39(a)(iv) adopts a provision that reminds dealers that engage in
telemarketing that they are also subject to the requirements of relevant state and federal laws and
rules, including the Prevention Act, the Telephone Consumer Protection Act, 11 and the rules of
the Federal Communications Commission relating to telemarketing practices and the rights of
telephone consumers. 12
Maintenance of Do-Not-Call lists
Proposed Rule G-39(d)(vi) maintains the requirement that a broker, dealer, or municipal
securities dealer making telemarketing calls must maintain a record of a caller’s request not to
receive further calls. However, the proposed rule change deletes the requirement that a dealer
honor a firm-specific do-not-call request for five years from the time the request is made.
Commission staff directed the MSRB to delete this provision because the time for which the
firm-specific opt-out must be honored under the FTC’s Telemarketing Sales Rule 13 is indefinite,
rather than five years as currently provided in Rule G-39. 14 Additionally, the proposed rule
change clarifies that the record of do-not-call requests must be permanent.
Outsourcing Telemarketing
MSRB Rule G-39(f) continues to state that, if a dealer uses another entity to perform
telemarketing services on its behalf, the dealer remains responsible for ensuring compliance with
all provisions contained in the rule. The proposed revisions clarify that dealers must consider
whether the entity or person that a dealer uses for outsourcing, is appropriately registered or
licensed, where required.
Caller Identification Information
10
The proposed rule amendments are similar in most material respects to Financial Industry
Regulatory Authority (“FINRA”) Rule 3230 (Telemarketing). The material differences between
FINRA Rule 3230 and the proposed revisions to MSRB Rule G-39 are described below.
11
See 47 U.S.C. 227.
12
See 47 CFR 64.1200.
13
See 16 CFR 310.4.
14
See Letter from Robert W. Cook, Director, Division of Trading and Markets, SEC, to Michael
G. Bartolotta, then Chairman of the Board of Directors of the MSRB, dated May 10, 2011.
6 of 41
Proposed Rule G-39(g) provides that dealers engaging in telemarketing must transmit
caller identification information 15 and are explicitly prohibited from blocking caller
identification information. The telephone number provided must permit any person to make a
do-not-call request during regular business hours. These provisions are similar to the caller
identification provision in the FTC rules. 16
Unencrypted Consumer Account Numbers
Proposed Rule G-39(h) prohibits a dealer from disclosing or receiving, for consideration,
unencrypted consumer account numbers for use in telemarketing. The proposed rule change is
substantially similar to the FTC’s provision regarding unencrypted consumer account numbers. 17
The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention
Act. 18 Additionally, the proposed rule change defines “unencrypted” as not only complete,
visible account numbers, whether provided in lists or singly, but also encrypted information with
a key to its decryption. The proposed definition is substantially similar to the approach taken by
the FTC. 19
Submission of Billing Information
Proposed Rule G-39(i) provides that, for any telemarketing transaction, a dealer must
obtain the express informed consent of the person to be charged and to be charged using the
identified account. If the telemarketing transaction involves preacquired account information 20
and a free-to-pay conversion 21 feature, the dealer must: (1) obtain from the customer, at a
15
Caller identification information includes the telephone number and, when made available by
the broker, dealer, or municipal securities dealer’s telephone carrier, the name of the broker,
dealer, or municipal securities dealer.
16
See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
17
See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
18
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4615.
19
Id. at 4616.
20
The term “preacquired account information” means any information that enables a dealer to
cause a charge to be placed against a customer’s or donor’s account without obtaining the
account number directly from the customer or donor during the telemarketing transaction
pursuant to which the account will be charged. See proposed Rule G-39(n)(xix).
21
The term “free-to-pay conversion” means, in an offer or agreement to sell or provide any
goods or services, a provision under which a customer receives a product or service for free for
an initial period and will incur an obligation to pay for the product or service if he or she does
7 of 41
minimum, the last four digits of the account number to be charged; (2) obtain from the customer
an express agreement to be charged and to be charged using the identified account number; and
(3) make and maintain an audio recording of the entire telemarketing transaction. For any other
telemarketing transaction involving preacquired account information, the dealer must: (1)
identify the account to be charged with sufficient specificity for the customer to understand what
account will be charged; and (2) obtain from the customer an express agreement to be charged
and to be charged using the identified account number. The proposed rule change is
substantially similar to the FTC’s provision regarding the submission of billing information. 22
The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention
Act. 23 Although these provisions may not be directly applicable to securities transactions
generally, and, more specifically, municipal securities transactions, the SEC directed the MSRB
to substantially conform this rule to FINRA’s telemarketing rule which includes similar
provisions. 24
Abandoned Calls
Proposed Rule G-39(j) prohibits a dealer from abandoning 25 any outbound telephone call.
The abandoned calls prohibition is subject to a “safe harbor” under proposed subparagraph (j)(ii)
that requires the dealer: (1) to employ technology that ensures abandonment of no more than
three percent of all calls answered by a person, measured over the duration of a single calling
campaign, if less than 30 days, or separately over each successive 30-day period or portion
thereof that the campaign continues; (2) for each outbound telephone call placed, to allow the
telephone to ring for at least 15 seconds or four rings before disconnecting an unanswered call;
(3) whenever a dealer is not available to speak with the person answering the outbound telephone
call within two seconds after the person’s completed greeting, to promptly play a recorded
message stating the name and telephone number of the dealer on whose behalf the call was
placed; and (4) to maintain records establishing compliance with the “safe harbor.” The
proposed rule change is substantially similar to the FTC’s provisions regarding abandoned
not take affirmative action to cancel before the end of that period. See proposed Rule G39(n)(xiii).
22
See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
23
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4616, et. seq.
24
See FINRA Rule 3230(i). See also Letter from Robert W. Cook, Director, Division of Trading
and Markets, SEC, to Michael G. Bartolotta, then Chairman of the Board of Directors of the
MSRB, dated May 10, 2011.
25
An outbound call is “abandoned” if a called person answers it and the call is not connected to a
dealer within two seconds of the called person’s completed greeting.
8 of 41
calls. 26 The FTC provided a discussion of the provisions when they were adopted pursuant to
the Prevention Act. 27
Prerecorded Messages
Proposed Rule G-39(k) prohibits a broker, dealer, or municipal securities dealer from
initiating any outbound telephone call that delivers a prerecorded message without a person’s
express written agreement 28 to receive such calls. The proposed rule change also requires that all
prerecorded outbound telephone calls provide specified opt-out mechanisms so that a person can
opt out of future calls. The prohibition does not apply to a prerecorded message permitted for
compliance with the “safe harbor” for abandoned calls under proposed subparagraph (j)(ii). The
proposed rule change is substantially similar to the FTC’s provisions regarding prerecorded
messages. 29 The FTC provided a discussion of the provisions when they were adopted pursuant
to the Prevention Act. 30
Credit Card Laundering
Except as expressly permitted by the applicable credit card system, proposed Rule G39(l) prohibits a dealer from: (1) presenting to or depositing into, the credit card system 31 for
26
See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 3230(j) (Throughout this section,
as well as Rule 3230(k) as referenced in footnote 30 infra, FINRA’s rule uses the term
“telemarketing call” and the MSRB rule instead uses the term “outbound telephone call” since
proposed MSRB Rule G-39(n)(xvi) defines “outbound telephone call” as a telephone call
initiated by a telemarketer to induce the purchase of goods or services or to solicit a charitable
contribution from a donor.).
27
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4641.
28
The express written agreement must: (a) have been obtained only after a clear and conspicuous
disclosure that the purpose of the agreement is to authorize the dealer to place prerecorded calls
to such person; (b) have been obtained without requiring, directly or indirectly, that the
agreement be executed as a condition of opening an account or purchasing any good or service;
(c) evidence the willingness of the called person to receive calls that deliver prerecorded
messages by or on behalf of the dealer; and (d) include the person’s telephone number and
signature (which may be obtained electronically under the Electronic Signatures in Global and
National Commerce Act, 15 U.S.C. 7001, et seq. (“E-Sign Act”)).
29
See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
30
See Federal Trade Commission, Telemarketing Sales Rule, 73 FR 51164 (August 29, 2008) at
51165.
31
The term “credit card system” means any method or procedure used to process credit card
transactions involving credit cards issued or licensed by the operator of that system. The term
9 of 41
payment, a credit card sales draft 32 generated by a telemarketing transaction that is not the result
of a telemarketing credit card transaction between the cardholder 33 and the dealer; (2)
employing, soliciting, or otherwise causing a merchant, 34 or an employee, representative or agent
of the merchant, to present to or to deposit into the credit card system for payment, a credit card
sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit
card transaction between the cardholder and the merchant; or (3) obtaining access to the credit
card system through the use of a business relationship or an affiliation with a merchant, when
such access is not authorized by the merchant agreement 35 or the applicable credit card system.
The proposed rule change is substantially similar to the FTC’s provisions regarding credit card
laundering. 36 The FTC provided a discussion of the provisions when they were adopted pursuant
to the Prevention Act. 37 Although these provisions may not be directly applicable to securities
transactions generally, and, more specifically, municipal securities transactions, the SEC directed
“credit card” means any card, plate, coupon book, or other credit device existing for the purpose
of obtaining money, property, labor, or services on credit. The term “credit” means the right
granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.
See proposed Rule G-39(n)(x), G-39(n)(viii), and G-39(n)(vii), respectively.
32
The term “credit card sales draft” means any record or evidence of a credit card transaction.
See proposed Rule G-39(n)(ix).
33
The term “cardholder” means a person to whom a credit card is issued or who is authorized to
use a credit card on behalf of or in addition to the person to whom the credit card is issued. See
proposed Rule G-39(n)(vi).
34
The term “merchant” means a person who is authorized under a written contract with an
acquirer to honor or accept credit cards, or to transmit or process for payment credit card
payments, for the purchase of goods or services or a charitable contribution. See proposed Rule
G-39(n)(xiv). The term “acquirer” means a business organization, financial institution, or an
agent of a business organization or financial institution that has authority from an organization
that operates or licenses a credit card system to authorize merchants to accept, transmit, or
process payment by credit card through the credit card system for money, goods or services, or
anything else of value. See proposed Rule G-39(n)(ii).
35
The term “merchant agreement” means a written contract between a merchant and an acquirer
to honor or accept credit cards, or to transmit or process for payment credit card payments, for
the purchase of goods or services or a charitable contribution. See proposed Rule G-39(n)(xv).
36
37
See 16 CFR 310.3(c).
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43852.
10 of 41
the MSRB to substantially conform this rule to FINRA’s telemarketing rule which includes these
provisions. 38
Exemption
Proposed Rule G-39(m) includes an exemption for business-to-business calls from most
of the provisions of the rule. Specifically, the exemption provides that outbound telephone calls
from a dealer to a business entity, government, or political subdivision, agency, or
instrumentality of a government are exempt from the rule, other than sections (a)(ii) and (d)(i)(iii), (v) and (vi). The sections of the proposed rule that would still apply to business-to-business
calls relate to the firm-specific do-not-call list and procedures related to (i) maintaining a do-notcall list, (ii) training personnel on the existence and use of the do-not-call list, (iii) the recording
and honoring of do-not-call requests, (iv) application to affiliated persons or entities, and (v)
maintenance of do-not-call lists. FINRA’s telemarketing rule, Rule 3230, does not include an
express exemption for business-to-business calls. 39 However, the FTC’s Telemarketing Sales
Rule includes an exemption from all of its provisions for telephone calls between a telemarketer
and any business, with a caveat that most of the rule continues to apply to sellers and
telemarketers of nondurable office or cleaning supplies. 40
When initially adopting the exception for business-to-business calls, the FTC indicated
that it believed Congress did not intend that every business use of the telephone be covered by
the FTC’s Telemarketing Sales Rule. 41 The only type of business-to-business calls that are
subject to the Telemarketing Sales Rule are calls to induce the retail sale of nondurable office or
cleaning supplies. 42 Sellers of these products are treated differently because the FTC believes
that the conduct prohibitions and affirmative disclosures mandated by the Telemarketing Sales
Rule are crucial to protect businesses from the harsh practices of some unscrupulous sellers of
these products. 43 Additionally, the FTC’s enforcement experience against deceptive
telemarketers indicated that office and cleaning supplies were by far the most significant
38
See FINRA Rule 3230(l). See also Letter from Robert W. Cook, Director, Division of Trading
and Markets, SEC, to Michael G. Bartolotta, then Chairman of the Board of Directors of the
MSRB, dated May 10, 2011.
39
See FINRA Rule 3230.
40
See 16 CFR 310.6(b)(7).
41
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43861.
42
43
See 16 CFR 310.6(b)(7).
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43862.
11 of 41
business-to-business problem area. 44 When adopting its Telemarketing Sales Rule in 1995, the
FTC indicated that it would consider expanding the list of business-to-business telemarketing
activities excluded from the exemption if additional business-to-business telemarketing activities
became problems after the Telemarketing Sales Rule became effective. 45 However, to date, the
only type of business-to-business telemarketing activity that is excluded from the exemption is
for telemarketers of nondurable office or cleaning supplies.
Exempting business-to-business calls pertaining to municipal securities from Rule G-39
is consistent with the FTC’s general exemption of business-to-business calls because, unlike
sellers of nondurable office or cleaning supplies, dealers are subject to an entire regulatory
regime, which includes the federal securities laws, the fair practice rules of the MSRB, and
examinations and enforcement by FINRA, banking regulators and the SEC. Nevertheless, the
provisions of proposed Rule G-39 pertaining to the firm-specific do-not-call list and related
procedures would apply to business-to-business calls. Dealers are already required to maintain a
firm-specific do-not-call list for requests that are not related to business-to-business calls;
therefore, requiring such a list with respect to business-to-business calls does not create an undue
burden. Moreover, it is reasonable to require dealers to honor the wishes of businesses that do
not wish to be solicited by telephone by requiring dealers to maintain a list of such do-not-call
requests. This approach is also consistent with FINRA’s telemarketing rule and related
guidance. 46
Definitions
Proposed Rule G-39(n) adopts the following definitions, which are substantially similar
to the FTC’s definitions of these terms 47: “acquirer,” “billing information,” “caller identification
service,” “cardholder,” “charitable contribution,” “credit,” “credit card,” “credit card sales draft,”
“credit card system,” “customer,” “donor,” “free-to-pay conversion,” “merchant,” “merchant
agreement,” “outbound telephone call,” “preacquired account information” and “telemarketer.” 48
Additionally, the proposed rule change deletes the reference to “telephone solicitation”. The
44
Id. at 43861.
45
Id.
46
See FINRA Rule 3230; see also FINRA guidance dated November 1, 1995, “Requirements of
member firms in maintaining do-not-call lists under NASD Rule 3110 (“[M]embers who are
involved in telemarketing, and whom make cold calls to the public, [must] . . . establish and
maintain a do-not-call list notwithstanding whether [the member] contact[s] businesses or
residences.” )
47
These definitions are also substantially similar to definitions in FINRA Rule 3230 with the
exception of “telemarketer” which is not defined in FINRA’s rule.
48
See proposed Rule G-39(n)(ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi),
(xvii), (xix), and (xx).
12 of 41
FTC provided a discussion of each definition when they were adopted pursuant to the Prevention
Act. 49
Proposed Rule G-39(n) also adopts definitions of “person” and “telemarketing” that are
substantively different from the FTC’s and FINRA’s definitions of these terms. While the
definition of “person” in proposed MSRB Rule G-39(n)(xvii) tracks the definition in the FTC
and FINRA rules to include any individual, group, unincorporated association, limited or general
partnership, corporation, or other business entity, it further defines a “person” to include a
government, or political subdivision, agency, or instrumentality of a government. These entities
are included in the proposed definition because dealers often solicit these types of entities.
While the definition of “telemarketing” is substantially similar to the definition in the FTC and
FINRA rules, it has been limited in MSRB Rule G-39(n)(xxi) to calls “pertaining to municipal
securities or municipal financial products” since the MSRB only promulgates rules pertaining to
the municipal securities activities of dealers. The limitation in the definition is intended to
correspond with the limits of the MSRB’s rulemaking authority. As described earlier, the MSRB
has implemented rules to address sales practices by dealers in their municipal securities
activities, including sales by telephone.
Technical and Conforming Changes
The proposed revisions to MSRB Rule G-39 make a number of minor technical and
conforming changes. First, the proposed revisions amend Rule G-39 to delete the phrase “or
person associated with a broker, dealer or municipal securities dealer” throughout the rule since
associated persons are included in the definition of “broker, dealer or municipal securities
dealer” in the MSRB rules. 50 Second, the proposed revisions renumber and make minor
technical changes to the terms “account activity,” “broker, dealer or municipal securities dealer
of record,” “established business relationship,” and “personal relationship”. Third, the proposed
revisions amend paragraphs (a), (b), (c), and (c)(iv), and (e) by replacing the term “telephone
solicitation” with the term “outbound telephone call.” Fourth, the proposed revisions amend
paragraphs (d)(iii), (d)(iv), and (d)(vi) by replacing the term “telemarketing” with the term
“outbound telephone”. Fifth, the proposed revisions update a reference to an “established
business relationship” in subparagraph (a)(1)(A). Finally, the proposed rule change amends
paragraph (b)(ii) to clarify that a signed, written agreement may be obtained electronically under
the E-Sign Act.
The MSRB requests an effective date for the proposed rule change of 90 days following
the date of SEC approval.
49
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43843 and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29,
2003) at 4587.
50
See MSRB Rule D-11 which states: “Unless the context otherwise requires or a rule of the
Board otherwise specifically provides, the terms ‘broker,’ ‘dealer,’ . . . ‘municipal securities
dealer,’ . . . shall refer to and include their respective associated persons.”
13 of 41
(b) Statutory Basis
The MSRB believes that the proposed rule change is consistent with Section
15B(b)(2)(C) of the Act, 51 which provides that the MSRB’s rules shall
be designed to prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with respect to, and
facilitating transactions in municipal securities and municipal financial products, to
remove impediments to and perfect the mechanism of a free and open market in
municipal securities and municipal financial products, and, in general, to protect
investors, municipal entities, obligated persons, and the public interest.
The MSRB believes that the proposed rule change is consistent with the Act because the
proposed rule change will prevent fraudulent and manipulative acts and protect investors and the
public interest by continuing to prohibit dealers from engaging in deceptive and other abusive
telemarketing acts or practices.
4.
Self-Regulatory Organization’s Statement on Burden on Competition
The MSRB does not believe that the proposed rule change would result in any burden on
competition that is not necessary or appropriate in furtherance of the purposes of the Act. As
discussed above, the Prevention Act requires the Commission to promulgate, or direct any
national securities exchange or registered securities association to promulgate, rules substantially
similar to the FTC rules to prohibit deceptive and other abusive telemarketing acts or practices.
5.
Self-Regulatory Organization’s Statement on Comments on the Proposed Rule
Change Received from Members, Participants, or Others
Written comments were neither solicited nor received on the proposed rule change.
6.
Extension of Time Period for Commission Action
The MSRB does not consent at this time to an extension of the time period for
Commission action specified in Section 19(b)(2) of the Act. 52
7.
Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for Accelerated
Effectiveness Pursuant to Section 19(b)(2) or Section 19(b)(7)(D)
Not applicable.
51
15 U.S.C. 78o-4(b)(2)(C).
52
15 U.S.C. 78s(b)(2).
14 of 41
8.
Proposed Rule Change Based on Rules of Another Self-Regulatory Organization or
of the Commission
The proposed rule change is similar to FINRA Rule 3230, and this rule filing is similar to
FINRA’s rule filing proposing to adopt that rule. Material differences between FINRA Rule
3230 and proposed MSRB Rule G-39 are discussed above.
9.
Security-Based Swap Submissions Filed Pursuant to Section 3C of the Act
Not applicable.
10.
Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and
Settlement Supervision Act
Not applicable.
11.
Exhibits
Exhibit 1.
Completed notice of proposed rule change for publication in the Federal
Register
Exhibit 5.
Text of proposed rule change
15 of 41
EXHIBIT 1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34; File No. SR-MSRB-2013-02)
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a
Proposed Rule Change Relating to Amendments to MSRB Rule G-39, on Telemarketing
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule
19b-4 thereunder, 2 notice is hereby given that on
the Municipal Securities
Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission (“SEC” or
“Commission”) the proposed rule change as described in Items I, II, and III below, which Items
have been prepared by the MSRB. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
I.
Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed
Rule Change
The MSRB is filing with the Commission proposed amendments to MSRB Rule G-39, on
telemarketing. The proposed rule change would adopt provisions that are substantially similar to
the telemarketing rules of the Federal Trade Commission (“FTC”).
The text of the proposed rule change is available on the MSRB’s website at
www.msrb.org/Rules-and-Interpretations/SEC-Filings/2013-Filings.aspx, at the MSRB’s
principal office, and at the Commission’s Public Reference Room.
II.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the MSRB included statements concerning the purpose
of and basis for the proposed rule change and discussed any comments it received on the
1
15 U.S.C. 78s(b)(1).
2
17 CFR 240.19b-4.
16 of 41
proposed rule change. The text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of
the most significant aspects of such statements.
A.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1.
Purpose
Summary of Proposed Rule Change. The MSRB proposes to amend Rule G-39, on
telemarketing, to add provisions that are substantially similar to FTC rules 3 that prohibit
deceptive and other abusive telemarketing acts or practices. Rule G-39 currently requires
brokers, dealers, and municipal securities dealers (“dealers”) to, among other things, maintain
do-not-call lists and limit the hours of telephone solicitations. In 1996, the SEC directed the
MSRB to enact a telemarketing rule in accordance with the Prevention Act. 4 The Prevention Act
requires the Commission to promulgate, or direct any national securities exchange or registered
securities association to promulgate, rules substantially similar to the FTC rules to prohibit
deceptive and other abusive telemarketing acts or practices, unless the Commission determines
either that the rules are not necessary or appropriate for the protection of investors or the
maintenance of fair and orderly markets, or that existing federal securities laws or Commission
rules already provide for such protection. 5
3
16 CFR 310.1-.9. The FTC initially adopted these rules in 1995 under the Telemarketing and
Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (the “Prevention Act”). See
Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) (the
“Telemarketing Sales Rule”). The Telemarketing Sales Rule has been amended since 1995,
prompting the SEC’s request for the MSRB to review its telemarketing rule. See footnote 7
infra.
4
15 U.S.C. 6101-6108.
5
15 U.S.C. 6102.
17 of 41
In 1997, the SEC determined that telemarketing rules promulgated and expected to be
promulgated by self-regulatory organizations, together with the other rules of the self-regulatory
organizations, the federal securities laws, and the SEC’s rules thereunder, satisfied the
requirements of the Prevention Act because, at the time, the applicable provisions of those laws
and rules were substantially similar to the Telemarketing Sales Rule. 6 Since 1997, the FTC has
amended its telemarketing rules in light of changing telemarketing practices and technology. 7
In May 2011, Commission staff directed the MSRB to conduct a review of its
telemarketing rule and propose rule amendments that provide protections that are at least as
strong as those provided by the FTC’s telemarketing rules. 8 Commission staff had concerns
“that the [self-regulatory organization] rules overall have not kept pace with the FTC’s rules, and
thus may no longer meet the standards of the Prevention Act.” 9
6
See Telemarketing and Consumer Fraud and Abuse Prevention Act; Determination that No
Additional Rulemaking Required, Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62
FR 18666 (Apr. 16, 1997). The Commission also determined that some provisions of the FTC’s
telemarketing rules related to areas already extensively regulated by existing securities laws or
activities not applicable to securities transactions.
7
See, e.g., Federal Trade Commission, Telemarketing Sales Rule, 73 FR 51164 (August 29,
2008) (amendments to the Telemarketing Sales Rule relating to prerecorded messages and call
abandonments); and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January
29, 2003) (amendments to the Telemarketing Sales Rule establishing requirements for, among
other things, sellers and telemarketers to participate in the national do-not-call registry).
8
See Letter from Robert W. Cook, Director, Division of Trading and Markets, SEC, to Michael
G. Bartolotta, then Chairman of the Board of Directors of the MSRB, dated May 10, 2011. The
MSRB was asked by SEC staff, notwithstanding the letter, to refrain from amending Rule G-39
until FINRA completed its rulemaking on this topic.
9
Id.
18 of 41
The proposed rule amendments, as directed by the Commission staff, amend and adopt
provisions in Rule G-39 that are substantially similar to the FTC’s current rules that prohibit
deceptive and other abusive telemarketing acts or practices as described below. 10
General Telemarketing Requirements
Proposed Rule G-39(a)(iv) adopts a provision that reminds dealers that engage in
telemarketing that they are also subject to the requirements of relevant state and federal laws and
rules, including the Prevention Act, the Telephone Consumer Protection Act, 11 and the rules of
the Federal Communications Commission relating to telemarketing practices and the rights of
telephone consumers. 12
Maintenance of Do-Not-Call lists
Proposed Rule G-39(d)(vi) maintains the requirement that a broker, dealer, or municipal
securities dealer making telemarketing calls must maintain a record of a caller’s request not to
receive further calls. However, the proposed rule change deletes the requirement that a dealer
honor a firm-specific do-not-call request for five years from the time the request is made.
Commission staff directed the MSRB to delete this provision because the time for which the
firm-specific opt-out must be honored under the FTC’s Telemarketing Sales Rule 13 is indefinite,
10
The proposed rule amendments are similar in most material respects to Financial Industry
Regulatory Authority (“FINRA”) Rule 3230 (Telemarketing). The material differences between
FINRA Rule 3230 and the proposed revisions to MSRB Rule G-39 are described below.
11
See 47 U.S.C. 227.
12
See 47 CFR 64.1200.
13
See 16 CFR 310.4.
19 of 41
rather than five years as currently provided in Rule G-39. 14 Additionally, the proposed rule
change clarifies that the record of do-not-call requests must be permanent.
Outsourcing Telemarketing
MSRB Rule G-39(f) continues to state that, if a dealer uses another entity to perform
telemarketing services on its behalf, the dealer remains responsible for ensuring compliance with
all provisions contained in the rule. The proposed revisions clarify that dealers must consider
whether the entity or person that a dealer uses for outsourcing, is appropriately registered or
licensed, where required.
Caller Identification Information
Proposed Rule G-39(g) provides that dealers engaging in telemarketing must transmit
caller identification information 15 and are explicitly prohibited from blocking caller
identification information. The telephone number provided must permit any person to make a
do-not-call request during regular business hours. These provisions are similar to the caller
identification provision in the FTC rules. 16
Unencrypted Consumer Account Numbers
Proposed Rule G-39(h) prohibits a dealer from disclosing or receiving, for consideration,
unencrypted consumer account numbers for use in telemarketing. The proposed rule change is
14
See Letter from Robert W. Cook, Director, Division of Trading and Markets, SEC, to Michael
G. Bartolotta, then Chairman of the Board of Directors of the MSRB, dated May 10, 2011.
15
Caller identification information includes the telephone number and, when made available by
the broker, dealer, or municipal securities dealer’s telephone carrier, the name of the broker,
dealer, or municipal securities dealer.
16
See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
20 of 41
substantially similar to the FTC’s provision regarding unencrypted consumer account numbers. 17
The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention
Act. 18 Additionally, the proposed rule change defines “unencrypted” as not only complete,
visible account numbers, whether provided in lists or singly, but also encrypted information with
a key to its decryption. The proposed definition is substantially similar to the approach taken by
the FTC. 19
Submission of Billing Information
Proposed Rule G-39(i) provides that, for any telemarketing transaction, a dealer must
obtain the express informed consent of the person to be charged and to be charged using the
identified account. If the telemarketing transaction involves preacquired account information 20
and a free-to-pay conversion 21 feature, the dealer must: (1) obtain from the customer, at a
minimum, the last four digits of the account number to be charged; (2) obtain from the customer
an express agreement to be charged and to be charged using the identified account number; and
(3) make and maintain an audio recording of the entire telemarketing transaction. For any other
17
See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
18
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4615.
19
Id. at 4616.
20
The term “preacquired account information” means any information that enables a dealer to
cause a charge to be placed against a customer’s or donor’s account without obtaining the
account number directly from the customer or donor during the telemarketing transaction
pursuant to which the account will be charged. See proposed Rule G-39(n)(xix).
21
The term “free-to-pay conversion” means, in an offer or agreement to sell or provide any
goods or services, a provision under which a customer receives a product or service for free for
an initial period and will incur an obligation to pay for the product or service if he or she does
not take affirmative action to cancel before the end of that period. See proposed Rule G39(n)(xiii).
21 of 41
telemarketing transaction involving preacquired account information, the dealer must: (1)
identify the account to be charged with sufficient specificity for the customer to understand what
account will be charged; and (2) obtain from the customer an express agreement to be charged
and to be charged using the identified account number. The proposed rule change is
substantially similar to the FTC’s provision regarding the submission of billing information. 22
The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention
Act. 23 Although these provisions may not be directly applicable to securities transactions
generally, and, more specifically, municipal securities transactions, the SEC directed the MSRB
to substantially conform this rule to FINRA’s telemarketing rule which includes similar
provisions. 24
Abandoned Calls
Proposed Rule G-39(j) prohibits a dealer from abandoning 25 any outbound telephone call.
The abandoned calls prohibition is subject to a “safe harbor” under proposed subparagraph (j)(ii)
that requires the dealer: (1) to employ technology that ensures abandonment of no more than
three percent of all calls answered by a person, measured over the duration of a single calling
campaign, if less than 30 days, or separately over each successive 30-day period or portion
thereof that the campaign continues; (2) for each outbound telephone call placed, to allow the
22
See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
23
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4616, et. seq.
24
See FINRA Rule 3230(i). See also Letter from Robert W. Cook, Director, Division of Trading
and Markets, SEC, to Michael G. Bartolotta, then Chairman of the Board of Directors of the
MSRB, dated May 10, 2011.
25
An outbound call is “abandoned” if a called person answers it and the call is not connected to a
dealer within two seconds of the called person’s completed greeting.
22 of 41
telephone to ring for at least 15 seconds or four rings before disconnecting an unanswered call;
(3) whenever a dealer is not available to speak with the person answering the outbound telephone
call within two seconds after the person’s completed greeting, to promptly play a recorded
message stating the name and telephone number of the dealer on whose behalf the call was
placed; and (4) to maintain records establishing compliance with the “safe harbor.” The
proposed rule change is substantially similar to the FTC’s provisions regarding abandoned
calls. 26 The FTC provided a discussion of the provisions when they were adopted pursuant to
the Prevention Act. 27
Prerecorded Messages
Proposed Rule G-39(k) prohibits a broker, dealer, or municipal securities dealer from
initiating any outbound telephone call that delivers a prerecorded message without a person’s
express written agreement 28 to receive such calls. The proposed rule change also requires that all
prerecorded outbound telephone calls provide specified opt-out mechanisms so that a person can
26
See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 3230(j) (Throughout this section,
as well as Rule 3230(k) as referenced in footnote 30 infra, FINRA’s rule uses the term
“telemarketing call” and the MSRB rule instead uses the term “outbound telephone call” since
proposed MSRB Rule G-39(n)(xvi) defines “outbound telephone call” as a telephone call
initiated by a telemarketer to induce the purchase of goods or services or to solicit a charitable
contribution from a donor.).
27
See Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29, 2003) at
4641.
28
The express written agreement must: (a) have been obtained only after a clear and conspicuous
disclosure that the purpose of the agreement is to authorize the dealer to place prerecorded calls
to such person; (b) have been obtained without requiring, directly or indirectly, that the
agreement be executed as a condition of opening an account or purchasing any good or service;
(c) evidence the willingness of the called person to receive calls that deliver prerecorded
messages by or on behalf of the dealer; and (d) include the person’s telephone number and
signature (which may be obtained electronically under the Electronic Signatures in Global and
National Commerce Act, 15 U.S.C. 7001, et seq. (“E-Sign Act”)).
23 of 41
opt out of future calls. The prohibition does not apply to a prerecorded message permitted for
compliance with the “safe harbor” for abandoned calls under proposed subparagraph (j)(ii). The
proposed rule change is substantially similar to the FTC’s provisions regarding prerecorded
messages. 29 The FTC provided a discussion of the provisions when they were adopted pursuant
to the Prevention Act. 30
Credit Card Laundering
Except as expressly permitted by the applicable credit card system, proposed Rule G39(l) prohibits a dealer from: (1) presenting to or depositing into, the credit card system 31 for
payment, a credit card sales draft 32 generated by a telemarketing transaction that is not the result
of a telemarketing credit card transaction between the cardholder 33 and the dealer; (2)
employing, soliciting, or otherwise causing a merchant, 34 or an employee, representative or agent
29
See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
30
See Federal Trade Commission, Telemarketing Sales Rule, 73 FR 51164 (August 29, 2008) at
51165.
31
The term “credit card system” means any method or procedure used to process credit card
transactions involving credit cards issued or licensed by the operator of that system. The term
“credit card” means any card, plate, coupon book, or other credit device existing for the purpose
of obtaining money, property, labor, or services on credit. The term “credit” means the right
granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.
See proposed Rule G-39(n)(x), G-39(n)(viii), and G-39(n)(vii), respectively.
32
The term “credit card sales draft” means any record or evidence of a credit card transaction.
See proposed Rule G-39(n)(ix).
33
The term “cardholder” means a person to whom a credit card is issued or who is authorized to
use a credit card on behalf of or in addition to the person to whom the credit card is issued. See
proposed Rule G-39(n)(vi).
34
The term “merchant” means a person who is authorized under a written contract with an
acquirer to honor or accept credit cards, or to transmit or process for payment credit card
payments, for the purchase of goods or services or a charitable contribution. See proposed Rule
G-39(n)(xiv). The term “acquirer” means a business organization, financial institution, or an
24 of 41
of the merchant, to present to or to deposit into the credit card system for payment, a credit card
sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit
card transaction between the cardholder and the merchant; or (3) obtaining access to the credit
card system through the use of a business relationship or an affiliation with a merchant, when
such access is not authorized by the merchant agreement 35 or the applicable credit card system.
The proposed rule change is substantially similar to the FTC’s provisions regarding credit card
laundering. 36 The FTC provided a discussion of the provisions when they were adopted pursuant
to the Prevention Act. 37 Although these provisions may not be directly applicable to securities
transactions generally, and, more specifically, municipal securities transactions, the SEC directed
the MSRB to substantially conform this rule to FINRA’s telemarketing rule which includes these
provisions. 38
Exemption
Proposed Rule G-39(m) includes an exemption for business-to-business calls from most
of the provisions of the rule. Specifically, the exemption provides that outbound telephone calls
agent of a business organization or financial institution that has authority from an organization
that operates or licenses a credit card system to authorize merchants to accept, transmit, or
process payment by credit card through the credit card system for money, goods or services, or
anything else of value. See proposed Rule G-39(n)(ii).
35
The term “merchant agreement” means a written contract between a merchant and an acquirer
to honor or accept credit cards, or to transmit or process for payment credit card payments, for
the purchase of goods or services or a charitable contribution. See proposed Rule G-39(n)(xv).
36
See 16 CFR 310.3(c).
37
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43852.
38
See FINRA Rule 3230(l). See also Letter from Robert W. Cook, Director, Division of Trading
and Markets, SEC, to Michael G. Bartolotta, then Chairman of the Board of Directors of the
MSRB, dated May 10, 2011.
25 of 41
from a dealer to a business entity, government, or political subdivision, agency, or
instrumentality of a government are exempt from the rule, other than sections (a)(ii) and (d)(i)(iii), (v) and (vi). The sections of the proposed rule that would still apply to business-to-business
calls relate to the firm-specific do-not-call list and procedures related to (i) maintaining a do-notcall list, (ii) training personnel on the existence and use of the do-not-call list, (iii) the recording
and honoring of do-not-call requests, (iv) application to affiliated persons or entities, and (v)
maintenance of do-not-call lists. FINRA’s telemarketing rule, Rule 3230, does not include an
express exemption for business-to-business calls. 39 However, the FTC’s Telemarketing Sales
Rule includes an exemption from all of its provisions for telephone calls between a telemarketer
and any business, with a caveat that most of the rule continues to apply to sellers and
telemarketers of nondurable office or cleaning supplies. 40
When initially adopting the exception for business-to-business calls, the FTC indicated
that it believed Congress did not intend that every business use of the telephone be covered by
the FTC’s Telemarketing Sales Rule. 41 The only type of business-to-business calls that are
subject to the Telemarketing Sales Rule are calls to induce the retail sale of nondurable office or
cleaning supplies. 42 Sellers of these products are treated differently because the FTC believes
that the conduct prohibitions and affirmative disclosures mandated by the Telemarketing Sales
Rule are crucial to protect businesses from the harsh practices of some unscrupulous sellers of
39
See FINRA Rule 3230.
40
See 16 CFR 310.6(b)(7).
41
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43861.
42
See 16 CFR 310.6(b)(7).
26 of 41
these products. 43 Additionally, the FTC’s enforcement experience against deceptive
telemarketers indicated that office and cleaning supplies were by far the most significant
business-to-business problem area. 44 When adopting its Telemarketing Sales Rule in 1995, the
FTC indicated that it would consider expanding the list of business-to-business telemarketing
activities excluded from the exemption if additional business-to-business telemarketing activities
became problems after the Telemarketing Sales Rule became effective. 45 However, to date, the
only type of business-to-business telemarketing activity that is excluded from the exemption is
for telemarketers of nondurable office or cleaning supplies.
Exempting business-to-business calls pertaining to municipal securities from Rule G-39
is consistent with the FTC’s general exemption of business-to-business calls because, unlike
sellers of nondurable office or cleaning supplies, dealers are subject to an entire regulatory
regime, which includes the federal securities laws, the fair practice rules of the MSRB, and
examinations and enforcement by FINRA, banking regulators and the SEC. Nevertheless, the
provisions of proposed Rule G-39 pertaining to the firm-specific do-not-call list and related
procedures would apply to business-to-business calls. Dealers are already required to maintain a
firm-specific do-not-call list for requests that are not related to business-to-business calls;
therefore, requiring such a list with respect to business-to-business calls does not create an undue
burden. Moreover, it is reasonable to require dealers to honor the wishes of businesses that do
not wish to be solicited by telephone by requiring dealers to maintain a list of such do-not-call
43
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43862.
44
Id. at 43861.
45
Id.
27 of 41
requests. This approach is also consistent with FINRA’s telemarketing rule and related
guidance. 46
Definitions
Proposed Rule G-39(n) adopts the following definitions, which are substantially similar
to the FTC’s definitions of these terms 47: “acquirer,” “billing information,” “caller identification
service,” “cardholder,” “charitable contribution,” “credit,” “credit card,” “credit card sales draft,”
“credit card system,” “customer,” “donor,” “free-to-pay conversion,” “merchant,” “merchant
agreement,” “outbound telephone call,” “preacquired account information” and “telemarketer.” 48
Additionally, the proposed rule change deletes the reference to “telephone solicitation”. The
FTC provided a discussion of each definition when they were adopted pursuant to the Prevention
Act. 49
Proposed Rule G-39(n) also adopts definitions of “person” and “telemarketing” that are
substantively different from the FTC’s and FINRA’s definitions of these terms. While the
definition of “person” in proposed MSRB Rule G-39(n)(xvii) tracks the definition in the FTC
and FINRA rules to include any individual, group, unincorporated association, limited or general
46
See FINRA Rule 3230; see also FINRA guidance dated November 1, 1995, “Requirements of
member firms in maintaining do-not-call lists under NASD Rule 3110 (“[M]embers who are
involved in telemarketing, and whom make cold calls to the public, [must] . . . establish and
maintain a do-not-call list notwithstanding whether [the member] contact[s] businesses or
residences.” )
47
These definitions are also substantially similar to definitions in FINRA Rule 3230 with the
exception of “telemarketer” which is not defined in FINRA’s rule.
48
See proposed Rule G-39(n)(ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi),
(xvii), (xix), and (xx).
49
See Federal Trade Commission, Telemarketing Sales Rule, 60 FR 43842 (August 23, 1995) at
43843 and Federal Trade Commission, Telemarketing Sales Rule, 68 FR 4580 (January 29,
2003) at 4587.
28 of 41
partnership, corporation, or other business entity, it further defines a “person” to include a
government, or political subdivision, agency, or instrumentality of a government. These entities
are included in the proposed definition because dealers often solicit these types of entities.
While the definition of “telemarketing” is substantially similar to the definition in the FTC and
FINRA rules, it has been limited in MSRB Rule G-39(n)(xxi) to calls “pertaining to municipal
securities or municipal financial products” since the MSRB only promulgates rules pertaining to
the municipal securities activities of dealers. The limitation in the definition is intended to
correspond with the limits of the MSRB’s rulemaking authority. As described earlier, the MSRB
has implemented rules to address sales practices by dealers in their municipal securities
activities, including sales by telephone.
Technical and Conforming Changes
The proposed revisions to MSRB Rule G-39 make a number of minor technical and
conforming changes. First, the proposed revisions amend Rule G-39 to delete the phrase “or
person associated with a broker, dealer or municipal securities dealer” throughout the rule since
associated persons are included in the definition of “broker, dealer or municipal securities
dealer” in the MSRB rules. 50 Second, the proposed revisions renumber and make minor
technical changes to the terms “account activity,” “broker, dealer or municipal securities dealer
of record,” “established business relationship,” and “personal relationship”. Third, the proposed
revisions amend paragraphs (a), (b), (c), and (c)(iv), and (e) by replacing the term “telephone
solicitation” with the term “outbound telephone call.” Fourth, the proposed revisions amend
paragraphs (d)(iii), (d)(iv), and (d)(vi) by replacing the term “telemarketing” with the term
50
See MSRB Rule D-11 which states: “Unless the context otherwise requires or a rule of the
Board otherwise specifically provides, the terms ‘broker,’ ‘dealer,’ . . . ‘municipal securities
dealer,’ . . . shall refer to and include their respective associated persons.”
29 of 41
“outbound telephone”. Fifth, the proposed revisions update a reference to an “established
business relationship” in subparagraph (a)(1)(A). Finally, the proposed rule change amends
paragraph (b)(ii) to clarify that a signed, written agreement may be obtained electronically under
the E-Sign Act.
The MSRB requests an effective date for the proposed rule change of 90 days following
the date of SEC approval.
2.
Statutory Basis
The MSRB believes that the proposed rule change is consistent with Section
15B(b)(2)(C) of the Act, 51 which provides that the MSRB’s rules shall
be designed to prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with respect to, and
facilitating transactions in municipal securities and municipal financial products, to
remove impediments to and perfect the mechanism of a free and open market in
municipal securities and municipal financial products, and, in general, to protect
investors, municipal entities, obligated persons, and the public interest.
The MSRB believes that the proposed rule change is consistent with the Act because the
proposed rule change will prevent fraudulent and manipulative acts and protect investors and the
public interest by continuing to prohibit dealers from engaging in deceptive and other abusive
telemarketing acts or practices.
B.
Self-Regulatory Organization’s Statement on Burden on Competition
The MSRB does not believe that the proposed rule change would result in any burden on
competition that is not necessary or appropriate in furtherance of the purposes of the Act. As
discussed above, the Prevention Act requires the Commission to promulgate, or direct any
51
15 U.S.C. 78o-4(b)(2)(C).
30 of 41
national securities exchange or registered securities association to promulgate, rules substantially
similar to the FTC rules to prohibit deceptive and other abusive telemarketing acts or practices.
C.
Self-Regulatory Organization’s Statement on Comments on the Proposed Rule
Change Received from Members, Participants, or Others
Written comments were neither solicited nor received on the proposed rule change.
III.
Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 45 days of the date of publication of this notice in the Federal Register or within
such longer period up to 90 days (i) as the Commission may designate if it finds such longer
period to be appropriate and publishes its reasons for so finding or (ii) as to which the selfregulatory organization consents, the Commission will:
(A)
by order approve or disapprove such proposed rule change, or
(B)
institute proceedings to determine whether the proposed rule change should be
disapproved.
Solicitation of Comments
IV.
Interested persons are invited to submit written data, views and arguments concerning the
foregoing, including whether the proposed rule change is consistent with the Act. Comments
may be submitted by any of the following methods:
Electronic comments:
•
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
•
Send an e-mail to rule-comments@sec.gov. Please include File Number SR-MSRB2013-02 on the subject line.
Paper comments:
•
Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and
Exchange Commission, 100 F Street, NE, Washington, DC 20549.
31 of 41
All submissions should refer to File Number SR-MSRB-2013-02. This file number should be
included on the subject line if e-mail is used. To help the Commission process and review your
comments more efficiently, please use only one method. The Commission will post all
comments on the Commission’s Internet website (http://www.sec.gov/rules/sro.shtml). Copies
of the submission, all subsequent amendments, all written statements with respect to the
proposed rule change that are filed with the Commission, and all written communications
relating to the proposed rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission’s Public Reference Room, 100 F
Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and
3:00 pm. Copies of the filing also will be available for inspection and copying at the principal
office of the MSRB. All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions should refer to File
Number SR-MSRB-2013-02 and should be submitted on or before [insert date 21 days from
publication in the Federal Register].
For the Commission, by the Division of Trading and Markets, pursuant to delegated
authority. 52
Elizabeth M. Murphy
Secretary
52
17 CFR 200.30-3(a)(12).
32 of 41
EXHIBIT 5
Exhibit 5 shows the text of the proposed rule change. Proposed new language is underlined;
proposed deletions are in brackets.
*****
Rule G-39
Telemarketing
(a) General Telemarketing Requirements. No broker, dealer or municipal securities dealer [or
person associated with a broker, dealer or municipal securities dealer] shall initiate any outbound
telephone call [solicitation, as defined in paragraph (g)(ii) of this rule,] to:
(i) Time of Day Restriction. Any residence of a person before the hour of 8:00 a.m. or
after 9:00 p.m. (local time at the called party's location), unless
(A) the broker, dealer or municipal securities dealer has an established business
relationship with the person pursuant to paragraph [(g)(i)(A)(1)] (n)(xii)(A),
(B) the broker, dealer or municipal securities dealer has received that person's
[prior] express prior consent [invitation or permission], or
(C) the person called is a broker, dealer or municipal securities dealer;
(ii) Firm-Specific Do-Not-Call List. Any person that previously has stated that he or she
does not wish to receive any outbound telephone calls made by or on behalf of the broker, dealer
or municipal securities dealer; or
(iii) National Do-Not-Call List. Any person who has registered his or her telephone
number on the Federal Trade Commission's national do-not-call registry.
(iv) Compliance with Other Requirements. This rule does not affect the obligation of any
broker, dealer or municipal securities dealer that engages in telemarketing to comply with
relevant state and federal laws and rules, including, but not limited to, the Telemarketing and
Consumer Fraud and Abuse Prevention Act codified at 15 U.S.C. 6101 – 6108, as amended, the
Telephone Consumer Protection Act codified at 47 U.S.C. 227, and the rules of the Federal
Communications Commission relating to telemarketing practices and the rights of telephone
consumers codified at 47 CFR 64.1200.
(b) National Do-Not-Call List Exceptions. A broker, dealer or municipal securities dealer making
outbound telephone [solicitations] calls will not be liable for violating paragraph (a)(iii) if:
(i) Established Business Relationship Exception. The broker, dealer or municipal
securities dealer has an established business relationship with the recipient of the call. A
person's request to be placed on the broker, dealer or municipal securities dealer’s firm-specific
33 of 41
do-not-call list terminates the established business relationship exception to [that] the national
do-not-call list provision for that broker, dealer or municipal securities dealer even if the person
continues to do business with the broker, dealer or municipal securities dealer;
(ii) Prior Express Written Consent Exception. The broker, dealer or municipal securities
dealer has obtained the person's prior express written consent [invitation or permission]. Such
[permission] consent must be clearly evidenced by a signed, written agreement (which may be
obtained electronically under the Electronic Signatures in Global and National Commerce Act,
15 U.S.C. 7001, et seq. (“E-Sign Act”)) between the person and the broker, dealer or municipal
securities dealer, which states that the person agrees to be contacted by the broker, dealer or
municipal securities dealer and includes the telephone number to which the calls may be placed;
or
(iii) Personal Relationship Exception. The [associated person] broker, dealer or
municipal securities dealer making the call has a personal relationship with the recipient of the
call.
(c) Safe Harbor Provision. A broker, dealer or municipal securities dealer [or person associated
with a broker, dealer or municipal securities dealer] making outbound telephone [solicitations]
calls will not be liable for violating paragraph (a)(iii) if the broker, dealer or municipal securities
dealer [or person associated with a broker, dealer or municipal securities dealer] demonstrates
that the violation is the result of an error and that as part of the broker, dealer or municipal
securities dealer's routine business practice, it meets the following standards:
(i) Written procedures. The broker, dealer or municipal securities dealer has established
and implemented written procedures to comply with the national do-not-call rules;
(ii) Training of personnel. The broker, dealer or municipal securities dealer has trained
its personnel, and any entity assisting in its compliance, in the procedures established pursuant to
the national do-not-call rules;
(iii) Recording. The broker, dealer or municipal securities dealer has maintained and
recorded a list of telephone numbers that it may not contact; and
(iv) Accessing the national do-not-call database. The broker, dealer or municipal
securities dealer uses a process to prevent outbound telephone [solicitations] calls to any
telephone number on any list established pursuant to the do-not-call rules, employing a version
of the national do-not-call registry obtained from the administrator of the registry no more than
[thirty-one (31)] 31 days prior to the date any call is made, and maintains records documenting
this process.
(d) Procedures. Prior to engaging in telemarketing, a broker, dealer or municipal securities
dealer must institute procedures to comply with paragraph (a). Such procedures must meet the
following minimum standards:
34 of 41
(i) Written policy. Brokers, dealers and municipal securities dealers must have a written
policy for maintaining a do-not-call list.
(ii) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of
telemarketing must be informed and trained in the existence and use of the do-not-call list.
(iii) Recording, disclosure of do-not-call requests. If a broker, dealer or municipal
securities dealer receives a request from a person not to receive calls from that broker, dealer or
municipal securities dealer, the broker, dealer or municipal securities dealer must record the
request and place the person's name, if provided, and telephone number on the firm's do-not-call
list at the time the request is made. Brokers, dealers and municipal securities dealers must honor
a person's do-not-call request within a reasonable time from the date such request is made. This
period may not exceed [thirty] 30 days from the date of such request. If such requests are
recorded or maintained by a party other than the broker, dealer or municipal securities dealer on
whose behalf the [telemarketing] outbound telephone call is made, the broker, dealer or
municipal securities dealer on whose behalf the [telemarketing] outbound telephone call is made
will be liable for any failures to honor the do-not-call request.
(iv) Identification of sellers and telemarketers. A broker, dealer or municipal securities
dealer [or person associated with a broker, dealer or municipal securities dealer] making an
outbound telephone call [for telemarketing purposes] must provide the called party with the
name of the individual caller, the name of the broker, dealer or municipal securities dealer, an
address or telephone number at which the broker, dealer or municipal securities dealer may be
contacted, and that the purpose of the call is to solicit the purchase of securities or related
service. The telephone number provided may not be a 900 number or any other number for
which charges exceed local or long distance transmission charges.
(v) Affiliated persons or entities. In the absence of a specific request by the person to the
contrary, a person's do-not-call request shall apply to the broker, dealer or municipal securities
dealer making the call, and will not apply to affiliated entities unless the consumer reasonably
would expect them to be included given the identification of the caller and the product being
advertised.
(vi) Maintenance of do-not-call lists. A broker, dealer or municipal securities dealer
making outbound telephone calls [for telemarketing purposes] must maintain a permanent record
of a [caller]person's request not to receive further [telemarketing] calls. [A firm-specific do-notcall request must be honored for five years from the time the request is made.]
(e) Wireless Communications. The provisions set forth in this rule are applicable to brokers,
dealers and municipal securities dealers [telemarketing or] making outbound telephone
[solicitations] calls to wireless telephone numbers.
(f) Outsourcing Telemarketing. If a broker, dealer or municipal securities dealer uses another
appropriately registered or licensed entity or person to perform telemarketing services on its
behalf, the broker, dealer or municipal securities dealer remains responsible for ensuring
compliance with all provisions contained in this rule.
35 of 41
[(g) Definitions.]
[(i) Established business relationship.]
[(A) An established business relationship exists between a broker, dealer or
municipal securities dealer and a person if:]
[(1) the person has made a financial transaction or has a security position,
a money balance, or account activity with the broker, dealer or municipal
securities dealer or at a clearing firm that provides clearing services to such
broker, dealer or municipal securities dealer within the eighteen months
immediately preceding the date of the telemarketing call;]
[(2) the broker, dealer or municipal securities dealer is the broker, dealer
or municipal securities dealer of record for an account of the person within the
eighteen months immediately preceding the date of the telemarketing call; or]
[(3) the person has contacted the broker, dealer or municipal securities
dealer to inquire about a product or service offered by the broker, dealer or
municipal securities dealer within the three months immediately preceding the
date of the telemarketing call.]
[(B) A person's established business relationship with a broker, dealer or
municipal securities dealer does not extend to the broker, dealer or municipal securities
dealer's affiliated entities unless the person would reasonably expect them to be included.
Similarly, a person's established business relationship with a broker, dealer or municipal
securities dealer's affiliate does not extend to the broker, dealer or municipal securities
dealer unless the person would reasonably expect the broker, dealer or municipal
securities dealer to be included.]
[(ii) The terms telemarketing and telephone solicitation mean the initiation of a telephone
call or message for the purpose of encouraging the purchase or rental of, or investment in,
property, goods, or services, which is transmitted to any person.]
[(iii) The term personal relationship means any family member, friend, or acquaintance of
the telemarketer making the call.]
[(iv) The term "account activity" shall include, but not be limited to, purchases, sales,
interest credits or debits, charges or credits, dividend payments, transfer activity, securities
receipts, or deliveries, and/or journal entries relating to securities or funds in the possession or
control of the broker, dealer or municipal securities dealer.]
[(v) The term "broker, dealer or municipal securities dealer of record" refers to the
broker, dealer or municipal securities dealer identified on a customer's account application for
accounts held directly at an issuer of municipal fund securities or by the issuer's agent.]
36 of 41
(g) Caller Identification Information.
(i) Any broker, dealer or municipal securities dealer that engages in telemarketing must
transmit or cause to be transmitted the telephone number, and, when made available by the
broker, dealer or municipal securities dealer’s telephone carrier, the name of the broker, dealer or
municipal securities dealer, to any caller identification service in use by a recipient of an
outbound telephone call.
(ii) The telephone number so provided must permit any person to make a do-not-call
request during regular business hours.
(iii) Any broker, dealer or municipal securities dealer that engages in telemarketing is
prohibited from blocking the transmission of caller identification information.
(h) Unencrypted Consumer Account Numbers. No broker, dealer or municipal securities dealer
shall disclose or receive, for consideration, unencrypted consumer account numbers for use in
telemarketing. The term “unencrypted” means not only complete, visible account numbers,
whether provided in lists or singly, but also encrypted information with a key to its decryption.
This paragraph shall not apply to the disclosure or receipt of a customer’s billing information to
process a payment pursuant to a telemarketing transaction.
(i) Submission of Billing Information. For any telemarketing transaction, a broker, dealer or
municipal securities dealer must obtain the express informed consent of the person to be charged
and to be charged using the identified account.
(i) In any telemarketing transaction involving preacquired account information and a
free-to-pay conversion feature, the broker, dealer or municipal securities dealer must:
(A) obtain from the customer, at a minimum, the last four digits of the account
number to be charged;
(B) obtain from the customer an express agreement to be charged and to be
charged using the account number pursuant to paragraph (i)(i)(A); and
(C) make and maintain an audio recording of the entire telemarketing transaction.
(ii) In any other telemarketing transaction involving preacquired account information not
described in paragraph (i)(i), the broker, dealer or municipal securities dealer must:
(A) identify the account to be charged with sufficient specificity for the customer
to understand what account will be charged; and
(B) obtain from the customer an express agreement to be charged and to be
charged using the account number identified pursuant to paragraph (i)(ii)(A).
(j) Abandoned Calls.
37 of 41
(i) No broker, dealer or municipal securities dealer shall “abandon” any outbound
telephone call. An outbound call is “abandoned” if a called person answers it and the call is not
connected to a broker, dealer or municipal securities dealer within two seconds of the called
person’s completed greeting.
(ii) A broker, dealer or municipal securities dealer shall not be liable for violating
paragraph (j)(i) if:
(A) the broker, dealer or municipal securities dealer employs technology that
ensures abandonment of no more than three percent of all outbound telephone calls
answered by a person, measured over the duration of a single calling campaign, if less
than 30 days, or separately over each successive 30-day period or portion thereof that the
campaign continues;
(B) the broker, dealer or municipal securities dealer, for each outbound telephone
call placed, allows the telephone to ring for at least 15 seconds or four rings before
disconnecting an unanswered call;
(C) whenever a broker, dealer or municipal securities dealer is not available to
speak with the person answering the outbound telephone call within two seconds after the
person’s completed greeting, the broker, dealer or municipal securities dealer promptly
plays a recorded message that states the name and telephone number of the broker, dealer
or municipal securities dealer on whose behalf the call was placed; and
(D) the broker, dealer or municipal securities dealer retains records establishing
compliance with paragraph (j)(ii).
(k) Prerecorded Messages.
(i) No broker, dealer or municipal securities dealer shall initiate any outbound telephone
call that delivers a prerecorded message other than a prerecorded message permitted for
compliance with the call abandonment safe harbor in paragraph (j)(ii)(C) unless:
(A) the broker, dealer or municipal securities dealer has obtained from the
recipient of the call an express agreement, in writing, that:
(1) the broker, dealer or municipal securities dealer obtained only after a
clear and conspicuous disclosure that the purpose of the agreement is to authorize
the broker, dealer or municipal securities dealer to place prerecorded calls to such
person;
(2) the broker, dealer or municipal securities dealer obtained without
requiring, directly or indirectly, that the agreement be executed as a condition of
opening an account or purchasing any good or service;
38 of 41
(3) evidences the willingness of the recipient of the call to receive calls
that deliver prerecorded messages by or on behalf of a specific broker, dealer or
municipal securities dealer; and
(4) includes such person’s telephone number and signature (which may be
obtained electronically under the E-Sign Act);
(B) the broker, dealer or municipal securities dealer allows the telephone to ring
for at least 15 seconds or four rings before disconnecting an unanswered call; and within
two seconds after the completed greeting of the person called, plays a prerecorded
message that promptly provides the disclosures in paragraph (d)(iv), followed
immediately by a disclosure of one or both of the following:
(1) for a call that could be answered by a person, that the person called can
use an automated interactive voice and/or keypress-activated opt-out mechanism
to assert a firm-specific do-not-call request pursuant to the broker, dealer or
municipal securities dealer’s procedures instituted under paragraph (d)(iii) at any
time during the message. The mechanism must:
(a) automatically add the number called to the broker, dealer or
municipal securities dealer’s firm-specific do-not-call list;
(b) once invoked, immediately disconnect the call; and
(c) be available for use at any time during the message;
(2) for a call that could be answered by an answering machine or
voicemail service, that the person called can use a toll-free telephone number to
assert a firm-specific do-not-call request pursuant to the broker, dealer or
municipal securities dealer’s procedures instituted under paragraph (d)(iii). The
number provided must connect directly to an automated interactive voice or
keypress-activated opt-out mechanism that:
(a) automatically adds the number called to the broker, dealer or
municipal securities dealer’s firm-specific do-not-call list;
(b) immediately thereafter disconnects the call; and
(c) is accessible at any time throughout the duration of the
telemarketing campaign; and
(C) the broker, dealer or municipal securities dealer complies with all other
requirements of this rule and other applicable federal and state laws.
(ii) Any call that complies with all applicable requirements of paragraph (k) shall not be
deemed to violate paragraph (j).
39 of 41
(l) Credit Card Laundering. Except as expressly permitted by the applicable credit card system,
no broker, dealer or municipal securities dealer shall:
(i) present to or deposit into, the credit card system for payment, a credit card sales draft
generated by a telemarketing transaction that is not the result of a telemarketing credit card
transaction between the cardholder and the broker, dealer or municipal securities dealer;
(ii) employ, solicit, or otherwise cause a merchant, or an employee, representative or
agent of the merchant, to present to or to deposit into the credit card system for payment, a credit
card sales draft generated by a telemarketing transaction that is not the result of a telemarketing
credit card transaction between the cardholder and the merchant; or
(iii) obtain access to the credit card system through the use of a business relationship or
an affiliation with a merchant, when such access is not authorized by the merchant agreement or
the applicable credit card system.
(m) Exemption. Outbound telephone calls from a broker, dealer, or municipal securities dealer to
a business entity, government, or political subdivision, agency, or instrumentality of a
government are exempt from this rule, other than sections (a)(ii) and (d)(i)-(iii), (v) and (vi).
(n) Definitions.
For purposes of this rule:
(i) The term "account activity" shall include, but not be limited to, purchases, sales,
interest credits or debits, charges or credits, dividend payments, transfer activity, securities
receipts or deliveries, and/or journal entries relating to securities or funds in the possession or
control of the broker, dealer or municipal securities dealer.
(ii) The term “acquirer” means a business organization, financial institution, or an agent
of a business organization or financial institution that has authority from an organization that
operates or licenses a credit card system to authorize merchants to accept, transmit, or process
payment by credit card through the credit card system for money, goods or services, or anything
else of value.
(iii) The term “billing information” means any data that enables any person to access a
customer’s or donor’s account, such as a credit or debit card number, a brokerage, checking, or
savings account number, or a mortgage loan account number. A “donor” means any person
solicited to make a charitable contribution. A “charitable contribution” means any donation or
gift of money or any other thing of value, for example a transfer to a pooled income fund.
(iv) The term "broker, dealer or municipal securities dealer of record" refers to the
broker, dealer or municipal securities dealer identified on a customer's account application for
accounts held by the issuer’s agent for municipal fund securities.
40 of 41
(v) The term “caller identification service” means a service that allows a telephone
subscriber to have the telephone number, and, where available, name of the calling party
transmitted contemporaneously with the telephone call, and displayed on a device in or
connected to the subscriber’s telephone.
(vi) The term “cardholder” means a person to whom a credit card is issued or who is
authorized to use a credit card on behalf of or in addition to the person to whom the credit card is
issued.
(vii) The term “credit” means the right granted by a creditor to a debtor to defer payment
of debt or to incur debt and defer its payment.
(viii) The term “credit card” means any card, plate, coupon book, or other credit device
existing for the purpose of obtaining money, property, labor, or services on credit.
(ix) The term “credit card sales draft” means any record or evidence of a credit card
transaction.
(x) The term “credit card system” means any method or procedure used to process credit
card transactions involving credit cards issued or licensed by the operator of that system.
(xi) The term “customer” means any person who is or may be required to pay for goods
or services offered through telemarketing.
(xii) The term “established business relationship” means a relationship between a broker,
dealer or municipal securities dealer and a person if:
(A) the person has made a financial transaction or has a security position, a
money balance, or account activity with the broker, dealer or municipal securities dealer
or at a clearing firm that provides clearing services to such broker, dealer or municipal
securities dealer within the eighteen months immediately preceding the date of an
outbound telephone call;
(B) the broker, dealer or municipal securities dealer is the broker, dealer or
municipal securities dealer of record for an account of the person within the eighteen
months immediately preceding the date of an outbound telephone call; or
(C) the person has contacted the broker, dealer or municipal securities dealer to
inquire about a product or service offered by the broker, dealer or municipal securities
dealer within the three months immediately preceding the date of an outbound telephone
call.
A person's established business relationship with a broker, dealer or municipal securities
dealer does not extend to the broker, dealer or municipal securities dealer's affiliated entities
unless the person would reasonably expect them to be included. Similarly, a person's established
business relationship with a broker, dealer or municipal securities dealer's affiliate does not
41 of 41
extend to the broker, dealer or municipal securities dealer unless the person would reasonably
expect the broker, dealer or municipal securities dealer to be included.
(xiii) The term “free-to-pay conversion” means, in an offer or agreement to sell or
provide any goods or services, a provision under which a customer receives a product or service
for free for an initial period and will incur an obligation to pay for the product or service if he or
she does not take affirmative action to cancel before the end of that period.
(xiv) The term “merchant” means a person who is authorized under a written contract
with an acquirer to honor or accept credit cards, or to transmit or process for payment credit card
payments, for the purchase of goods or services or a charitable contribution.
(xv) The term “merchant agreement” means a written contract between a merchant and
an acquirer to honor or accept credit cards, or to transmit or process for payment credit card
payments, for the purchase of goods or services or a charitable contribution.
(xvi) The term “outbound telephone call” means a telephone call initiated by a
telemarketer to induce the purchase of goods or services or to solicit a charitable contribution
from a donor.
(xvii) The term “person” means any individual, group, unincorporated association,
limited or general partnership, corporation, other business entity, government, or political
subdivision, agency, or instrumentality of a government.
(xviii) The term “personal relationship” means any family member, friend, or
acquaintance of the broker, dealer or municipal securities dealer making an outbound telephone
call.
(xix) The term “preacquired account information” means any information that enables a
broker, dealer or municipal securities dealer to cause a charge to be placed against a customer’s
or donor’s account without obtaining the account number directly from the customer or donor
during the telemarketing transaction pursuant to which the account will be charged.
(xx) The term “telemarketer” means any person who, in connection with telemarketing,
initiates or receives telephone calls to or from a customer or donor.
(xxi) The term “telemarketing” means consisting of or relating to a plan, program, or
campaign involving at least one outbound telephone call pertaining to municipal securities or
municipal financial products, for example cold-calling. The term does not include the
solicitation of sales through the mailing of written marketing materials, when the person making
the solicitation does not solicit customers by telephone but only receives calls initiated by
customers in response to the marketing materials and during those calls takes orders only without
further solicitation. For purposes of the previous sentence, the term “further solicitation” does
not include providing the customer with information about, or attempting to sell, anything
promoted in the same marketing materials that prompted the customer’s call.